Marketplace Logo Donate

Daily business news and economic stories from Marketplace

Lower gas taxes lure drivers to Missouri

A man refuels his car in Munich, Germany. Miguel Villagran/Getty Images

Subscribe to our Newsletters

Steve Chiotakis: Maybe you’re on the road this long holiday weekend. And even though they’ve been trending down lately, gas prices are still a lot higher than they were one year ago. That’s been bad for the economy of Illinois, beacause it’s cheaper to get gas in Missouri. From St. Louis public radio Adam Allington reports.

Adam Allington: One of the cardinal rules about interstate travel through the Midwest: “Gas up before you hit Illinois.” Illinois levies a hefty 42 cents per gallon tax on gasoline, among the highest gas taxes in the country.

Compare that with Missouri, which only charges 17 cents per gallon, and you’re bound to see a lot of Illinois license plates in St. Louis gas stations.

Cameron Hollway: We almost never buy gas in Illinois.

Cameron Hollway lives in Illinois and drives across the Mississippi River every day to work in St. Louis. During the last oil crisis in 2008, he actually ran out of gas trying to make it to Missouri.

Hollway: I always know that in Illinois, it’s 20 cents or so more than it is in Missouri, so I’m always going to fill up over here.

And it’s not just gasoline where Missouri undercuts its neighbor. The state also has lower taxes on beer, liquor, cigarettes, even sales tax.

Ron Leone: This is a fall on the sword issue, when it comes to state fuel taxes, state tobacco taxes.

Ron Leone heads a lobbying group for Missouri’s gas stations and convenience stores. He says the lower taxes attract tens of thousands of cross-border shoppers every day.

Leone: We will do everything within our power to keep them low, to keep them reasonable.

But critics point out that cutting taxes on gas or cigarettes has never actually increased state revenues, or paid for any new roads and bridges.

Ralph Martire is the director of an Illinois think tank called the Center for Tax and Budget Accountability.

Ralph Martire: All the data show that the supply-side theory of public finance, it just doesn’t work. So anyone who’s counting on that coming through, people buying substantially more gasoline because the taxes are lower are — I think the technical fiscal term is “goofy.”

Martire says a race-to-the-bottom in taxes may not be a successful long-term strategy. He points to studies in Illinois that show every tax dollar spent on infrastructure has actually created $1.50 in economic activity.

In St. Louis, I’m Adam Allington for Marketplace.

What's Next

Latest Episodes From Our Shows

9:18 AM PDT
4:19 AM PDT
7:58 AM PDT
Mar 22, 2023
Mar 22, 2023
Mar 22, 2023
Dec 8, 2022
Exit mobile version